by:  Mark A. Cobb

Over the weekend, I was speaking with an older gentleman who had held a prominent job in sales.  He had served in that capacity for decades despite changes in technology, product and the opening of foreign markets.  What were his secrets to longevity?  This question became even more pertinent after he shared with me that his sales were always 10 to 20 percent below the other salesmen who worked for his firm.  His secret?  His collection rate was virtually 100%!!

Frequently, today’s business are divided between sales departments and credit departments, but this gentlemen has been trained in a prior period when salesmen were also directly responsible for collecting on their accounts.  Thus, he shared, he would sell on (i) cash terms to anyone but (ii) credit was reserved for those who had a reputation or character for being honest and trustworthy.  In addition, if bills were not paid promptly (usually at the time of delivery!), he wouldn’t sell to them anymore.  This may sound harsh or contravene the call to sell, sell, sell.  But while other salesmen had quarterly sales of $1M, the company only received revenues of around $650,000, he claimed; whereas, his sales were only $850,000 but his collected revenue was also $850,000.  Thus, his bottom-line margins were much superior to his peers.

This insightful conversation reminded me of all the great things that anyone selling on credit can do to help make sure they get paid.  These suggestions are generally applicable to any business which supplies items on credit, however, they are written particularly with Georgia subcontractor and suppliers in mind!  Here are some ideas to consider and implement before issuing credit:

• Obtain a signed credit application and credit agreement
• Obtain useful information such as the debtor’s tax id number, social security number, home physical address, spouse’s name, bank account information, etc.
• Require a personal guaranty agreement
• Obtain useful information about the guarantor including correct spelling of his/her name, social security number, driver’s license, home physical address, bank account, spouse’s name, etc.
• Make sure your credit terms include interest and attorney’s fees
• If you are a third tier supplier or sub-subcontractor, make certain that you send a Georgia Notice to Owner and a Notice to Contractor (sometimes called a Notice of Furnishing) within 30 days of the first day in which you begin work on the job site
• If you are working on or selling materials to construction projects, you must separate your billing (and invoicing) by project
• Internally, make sure that you consistently use your customer’s full, legal name
• Invoice your customer consistently and timely
• Keep copies of delivery tickets or emails confirming receipt of your labor or materials
• Require any changes in product or costs to be in writing and signed by the party who will be paying you
• When payments are not made (or are NSF), consider re-evaluating the amount of credit your are willing to extend to your customer
• If you are a specialty subcontractor or material supplier working on a Georgia construction project, make sure that your materialmen’s lien and/or payment bond claims are made within 90 days of the last day in which you worked (or within 60 days if you signed a Georgia lien waiver or bond release).
• Contact a reputable Georgia construction collection attorney as soon as possible as “the early bird get the worm”

If your salesman and credit managers work together to recognize the importance of collecting proper information from customer up-front, then your collection rate should improve substantially.  If you need an experienced Georgia construction collection lawyer to review your credit application, credit agreement, personal guaranty or any other document, please feel free to call us at (866) 960-9539 or email us today.